Thursday 1 November 2012 05.25 EDT
First published on Thursday 1 November 2012 05.25 EDT

Nick Clegg has warned Tory rebels who combined with Labour to inflict a damaging defeat on the coalition that they have "absolutely no hope" of achieving their goal of forcing the European Union to cut spending.

David Cameron will face a battle to secure parliamentary backing for any EU budget deal that falls short of a real-terms cut after he suffered his first major Commons defeat on EU spending on Wednesday night. Senior Conservative MPs, who stopped short of joining 53 Eurosceptic rebels in the division lobbies, served notice that they would turn against the government if Cameron refused to harden his position – that the budget must at least be frozen in real terms – at an EU summit later this month.

In the wake of David Cameron suffering his first major Commons defeat on EU spending, both Clegg and Chancellor George Osborne, turned their fire on Labour for joining Tory rebels. But while the deputy prime minister made clear there was "absolutely no prospect" of achieving a real-terms cut in the EU budget, the Conservative chancellor indicated that there was a chance of a cut.

Clegg will use a speech to be delivered to the Chatham House international affairs thinktank to insist that, with the majority of the 27 member states net recipients from the EU budget, he and the prime minister were "absolutely united" in the view that the best strategy for Britain was to press for a real-terms freeze, with the budget continuing to rise with inflation.

He will accuse Labour of making a dishonest and hypocritical change of policy for short-term political advantage despite being well aware there is "absolutely no prospect" of achieving a real-terms cut.

A failure to reach agreement next month in Brussels would mean the reversion to one-year budgets, which would be even more costly to the UK, he is expected to say.

"Their change of heart is dishonest, it's hypocritical. And worst of all, Labour's plan would cost the taxpayer more, not less. Because in pushing a completely unrealistic position on the EU budget – one that is miles away from any other country's position – Labour would have absolutely no hope of getting a budget deal agreed. We've been waiting for years for the Labour party to finally announce how they would cut spending. Now they have finally come out in favour of cuts but in a way they know is undeliverable, and in a way that would hurt British taxpayers. And it turns out even their cuts cost money."

Osborne told the BBC Radio 4 Today programme that the government needed to listen to all coalition MPs and that "the real test" would be when the House of Commons was faced with a choice of whether to accept a deal or go for the alternative.

"Let us see what we bring home, if we think there's a good deal," he said.

Osborne said other member states had favoured a freeze, pointing to a letter Cameron signed in 2010 with the German chancellor, Angela Merkel, the former French president Nicolas Sarkozy, the Dutch prime minister and the prime minister of Finland "saying that they want a freeze, at worst a freeze and, actually, there was the possibility of a reduction. Let's see what happens in these negotiations and there are a lot of moving parts here."

He said the moment of truth would come when the House of Commons was faced with a choice of whether to accept a deal or go for the alternative.

"It will come in the next year or so. It will only come if, in David Cameron's judgment and the judgment of the British government, a deal is better than no deal. If that is our judgment then we will put it to the House of Commons, but the House of Commons is sovereign and it will make that decision.

"The question is and the question that the House of Commons and the British government will have to face and, ultimately, I guess, it's also for the British people is: 'Is that deal better than the alternative?' And the alternative if we don't have a deal in Europe and, of course, we've not just got to get this past the House of Commons, there are also 26 other European countries who have also got vetoes and the like, are they also prepared to live with a deal?"

The Tory MP Sir Tony Baldry rounded on fellow Tories for inflicting a defeat on the prime minister. He urged them to "get a grip".

"Colleagues have got to realise that we've got to get a grip and support the prime minister," he told Today. "The prime minister is entitled to have the support and know he's going to have the support of his backbenches and not constantly face a combination of Conservative rebels and [an] opportunist Labour party seeking to undermine him."

One of the rebels, the Totnes MP Sarah Wollaston, insisted the Tories were united and that Cameron still had her support.

"He does have my support and that's the real sadness to me here is that this is being allowed to be portrayed as some kind of division," she told Today. "I don't know any Conservatives who feel that what they want is the £300m increase per year in our contribution.

"When people talk about a real-term freeze, what they mean is an increase in line with inflation. What I'm saying is we and the House of Commons and the country have clearly given the prime minister a mandate to go into Europe saying: 'We want a real cut' and that Europe has to make the same hard choices that our constituents are making."

She added: "I think all this reporting that we have today about divisions in the Conservative party astonishes me because the Conservative party is not divided on Europe. We absolutely back the prime minister but we want to send him to Europe with a really hard message about what they are doing and how they are spending our money."